LONDON BRIEFING:Eric Daniels outlasted his peers, but he should not expect praise when he steps down

WHEN Eric Daniels steps down at Lloyds Banking Group next year, he will do so as the longest-serving chief executive at a major British bank. But the man who survived the credit crunch should not expect too many plaudits when he retires from the role he has held since 2003.

Known as the “quiet American”, Daniels outlasted Sir Fred Goodwin at Royal Bank of Scotland, Andy Hornby at HBOS and even his own chairman, Sir Victor Blank, who fell on his sword last year.

But his longevity is no measure of his success and Daniels’s legacy will forever be Lloyds’ disastrous takeover of HBOS, a deal that left the group needing massive cash injections from taxpayers and the government sitting on a stake of 40 per cent. For years, Daniels was criticised for being too conservative and for failing to take Lloyds into the lucrative world of investment banking.

All that boring conservatism paid off when the credit crunch struck, putting Lloyds in a far stronger position than its rivals. But, in a moment of deal-making madness, Daniels threw away his reputation for caution and catapulted Lloyds into the eye of the credit crunch storm with the takeover of HBOS.

Even as his retirement was announced earlier this week, Daniels was still defending the HBOS deal and it is possible, of course, that it may come right in the end. But at what price?

Lloyds shareholders are certainly glad to see the back of him. The pressure group Lloyds Action Now says it will continue to pursue its personal claim against Daniels over the £12 billion it calculates was lost to investors as a result of the takeover.

As is traditional with departing bankers, Daniels can look forward to a lucrative retirement. He has built up a pension pot that will provide him with an annual income of almost £200,000 and stands to collect several million more in share options and bonus payments.

Meanwhile, the race is on to find a successor for his £1 million a year job, with at least a dozen candidates in the frame and more being added by the day. The successful candidate will, however, be taking a big leap into the unknown when they take on the politically-charged job.

Whatever strategic vision they may wow the board with at their interviewcould be rendered redundant in a year’s time, once the government’s new banking commission delivers its verdict on the industry.

This Friday, the Independent Commission on Banking will, in its first public statement, outline the scope of what will be a year-long investigation into the future of banking. Headed by Sir John Vickers, a former chief economist at the Bank of England, the commission is tasked with devising a way to overhaul the industry, reduce the risk of systemic failure, promote competition among high-street banks and moderate the moral hazard whereby bankers are insulated from the effects of their risky behaviour while the rest of us suffer the consequences.

Breaking up the big banks to separate their high-street arms from the so-called casino banking operations will be at the heart of the commission’s investigation.

Despite the continuing public clamour for the banks to be reined in, a forced break-up may ultimately prove too complex to achieve and would certainly be fiercely resisted by the banks.

More likely than a full-scale dismantling are proposals for some form of ringfencing of the banks’ riskier operations.

Lloyds, with a 25 per cent share of the market for current accounts and a similar share of the mortgage market, will come under particular scrutiny when the commission looks at the issue of competition on the high street. It is possible that, rather than just selling branches, the commission might propose a complete unravelling of the HBOS deal.

Such uncertainty would make some candidates think twice about the Lloyds job. Among those already in the frame are several names from HSBC, the bank judged to have come through the crisis in better shape than most, and which is undergoing its own change at the top following Stephen Green’s departure to become trade minister.

There are also a number of internal candidates, the most hotly tipped of whom is Helen Weir, formerly finance director but now in charge of retail banking. If she were to be appointed, she would be the first woman to head a British high street bank. We can be fairly certain of one thing – she couldn’t do any worse than the men.

Fiona Walsh writes for the Guardian newspaper in London